Sunday, November 29, 2009

Tata Motors’ Vice-Chairman Ravi Kant said Tata Group should be perceived as British as any other British group or company by people here.

In a speech delivered at the International Automotive Summit in London, hosted by the industry body, The Society of Motor Manufacturers and Traders (SMMT), Kant said the Group’s presence in the UK is formidable, with 19 businesses employing over 47,000 people in this country.

Kant’s projection of the Tata Group as an integral part of the British industrial landscape comes at a time when Tata Motors’ owned Jaguar Land Rover had faced some challenges in convincing the UK government to lend support in raising money.

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Target

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Feb-00

£271 million

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Set up by Tata Motors

Corus Group

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Jaguar Land Rover

Mar-08

$2.3 billion

The summit was attended by Britain’s Secretary of State for Business, Innovation and Skills, Lord Peter Mandelson. Earlier this year, Tata Group was in a series of intense negotiations with Mandelson’s office for a guarantee from the UK government for a £340 million loan approved by the European Investment Bank. The negotiations failed to bear fruit, forcing JLR (Tata Motors) to raise money on its own. Since the breakdown of negotiations, JLR has managed to raise twice as much money (around £670 million) on its own from sources in Europe and India. According to media reports, the negotiations between JLR and the UK government broke after the group refused to accommodate a government nominee on its board.

Highlighting the significance of the manufacturing sector in the UK (that is today seen to depend on its financial services sector for economic prosperity), Kant said, “UK needs to take care of manufacturing and not just financial services. Even the great city of London cannot carry the entire UK economy on its back.”Nearly 65 per cent of Tata Group’s $71 billion revenue today comes from outside India. Outside India, Tata’s strongest presence is in Britain.

Only a few months away from a general election, British prime minister Gordon Brown today promised to tighten immigration rules. The change will be fair and considerate to the needs of domestic industry, he said.

Defending the labour government’s points-based system for allowing non-EU immigrants to settle and work in UK, Brown said that this system had helped bring down net-immigrants into the country by 44 per cent.

“It is because we believe those who look to build a new life in Britain should earn the right to do so that we will now push forward the points-based system to the next stage, by introducing a points-based test not just for entry but also for permanent residence and citizenship,” Brown said in a speech delivered in West London today.

Skills in engineering roles, skilled chefs and care workers could soon be taken off the “shortage list”, a category that allows more flexible immigration rules for non-EU workers to fill up. “We set up the expert Migration Advisory Committee to advise on the effects of the points-based system on the labour market, and while their latest report confirms that there remain skills we need to recruit from abroad, it confirms also that we no longer need to recruit civil engineers, hospital consultants, aircraft engineers and ships’ officers from abroad -- and so these and other jobs are being taken off the list.”

Brown said a case for raising the minimum level of courses for which foreign students can get a visa will also be looked into, based on a report to be given by the Home Office and the Department for Business, Innovation and Skills, and “key stakeholders”. Brown said his government will also examine the case for introducing mandatory English language-testing for student visas other than for English courses.

Brown’s new policy initiative also comes at a time when his government is under constant attack for keeping UK’s borders too porous and allowing a large number of migrant workers to compete with locals for a shrinking job market,

Brown today said, “I have never agreed with the lazy elitism that dismisses immigration as an issue or portrays anyone who has concerns about immigration as a racist.”

Brown also said criminals from within the EU will be treated the same way as those from outside the EU and offenders who are sentenced to more than 12 months in jail will be deported, irrespective of their country of origin.

Conservative leaders in the opposition said they were not appeased by Brown’s new policy. Shadow home secretary Chris Grayling said: “Gordon Brown’s speech had a completely hollow ring to it.”

Earlier last month, at his party’s annual conference, Grayling had said if the Conservatives comes to power, their government would introduce a ceiling on immigration to check the “gaping hole” in policy. He has also promised to put a check on the “rampant abuse” of students’ visas.

Tuesday, November 10, 2009

A two-year long global recession, Mumbai terror attack and then swine-flu, each coming on the back of the other. The tourism industry in India could not have expected anything worse than this. It however is starting to see its own green-shoots popping up. October 2009 saw the rate of fall in foreign tourist arrivals making a sharp decline to less than one percent against a 17 per cent fall in January 2009 (over January 2008). The Ministry of Tourism believes this is the beginning of recovery of the industry and things can only get better from here.

India’s Union tourism minister, Selja, addressing the media here on the eve of the World Tourism Mart in London said with 6 per cent of GDP and 9 per cent of employment in India coming from tourism industry, recovery of this industry will be paramount to the overall economic recovery as well. Global recession should have ideally driven more foreign tourists to India, given that money travels much farther in a relatively low cost economy like India. But the November 2008 terror attack in Mumbai and mid-2009 swine flu scare denied India to cash in on this opportunity, she said.

Selja said the next big opportunity for India’s tourism industry will be the Commonwealth Games that Delhi will host in October 2010, when nearly 100,000 tourists are expected to arrive during the 15-day period. The minister assured that Delhi will be ready with the estimated demand for 40,000 hotel rooms during the games. “We already have 10,000 and by mid next year, we should be ready with the rest,” she said.

Between January and July 2009, fall in arrival of tourists was successfully arrested from a peak fall of 17.6 per cent in January to a growth of 0.6 per cent in July 2009. However, arrivals dropped sharply again in August to 8.6 per cent and another 4.1 per cent in September, following fear of swine-flu. Despite the optimism of a gentle recovery, the overall numbers for the full year 2009 is expected to be lower than 2008.

In 2008, India welcomed 5.3 million tourists, while the arrivals between January and October 2009 has been only 4.2 million, suggesting the last two months of this year will not make up for the shortfall witnessed until October 2009.

Despite the fall in foreign tourist arrivals, foreign exchange earnings in US dollar terms has improved considerably. While the forex earnings in January shrunk by a third over January 2008, it had increased by 17.8 per cent in October, due to the weakening of the dollar against the rupee (and other major currencies). However the overall earnings between January and October this year is still 10.3 per cent less than the earnings for the same period last year.

Despite the recession, US and UK continue to hold the top two slots for “source countries”, contributing 15.73 per cent and 15.67 per cent, respectively. The position of these two countries and their contribution to arrivals has remained unaltered over the last two years.

The minister said state- owned India Tourism Development Corporation could be one of the PSUs in which the Union government can disinvest.

Chennai-based software company Fifth Generation Technologies India (5G) will soon join a long list of small and large Indian businesses to set base in the northeast of Britain, with its new research and development centre in Sunderland Software City.

The company will commence its operations in this new centre by mid-November and will initially focus on using the centre as a sales and marketing platform for fresh businesses in Europe. The company plans to invest £2 million in this new centre.

Ananth Seshan, CEO and MD, said 5G would also use the strong academia base in the region (like Durham, Newcastle and Teesside universities) to develop non-invasive software for improving energy efficiency in the manufacture sector.

Pranab Mukherjee Finance minister Pranab Mukherjee said that despite the shortfall in agriculture production, India has adequate buffer stocks of rice and wheat and the government will import what is needed to maintain demand and supply.

Addressing the media here on Sunday evening after attending the G20 Finance Ministers' meet in Edinburgh over the weekend, Mukherjee said shortage of rainfall in the country will have some impact on GDP growth in the current financial year, now estimated at around 6.5 per cent. He, however, added the country holds eight million tonnes and seven million tonnes of wheat and rice buffer stock, respectively.

"Agriculture output has been reduced due to adverse impact of shortfall in rain or floods in some parts of the country. There might be some shortfall of agricultural production which will adversely impact the overall growth which would have given more than 6.5 per cent GDP growth. Now we are assessing that it might be around 6.5 per cent. There is inflationary pressure, but to what level it will go beyond the manageable limit is yet to be seen. Seasonal factors have contributed to high prices of some of the essential commodities. I do hope that it will be possible to have a moderate impact after a month or so, particularly those that are affected by the seasonal factors," Mukherjee said.

"Therefore, though there might be shortfall of grain production, to depress the inflationary pressure we have taken adequate care to maintain the demand and supply position by allowing commodities of shortfall to be imported. Most of these foodgrains)come under OGL (open general licence) without any duty and imports are taking place," he added.

Mukherjee reiterated the Prime Minister's assessment yesterday that if rainfall is adequate, India's GDP will have a higher projection (next year), of more than 7 per cent. "I am also optimistic to that extent," he said.

For want of clarity on details, India is yet to take a stand on the proposed tax on financial transactions (popularly known as the Tobin tax) under the G20 forum, he said. "I would, however, like to make a general observation. Taxation laws have territorial jurisdiction. Article 265 of the Indian Constitution clearly says that no tax can be levied other than under the authority of the law. The competent authority to pass law in respect of this is the Parliament of India," he said.

Mukherjee said the current levels of fiscal deficits cannot be sustained for a longer period of time. "By the medium term, India will have to reduce the fiscal and revenue deficit. By 2012, we will have to reduce the fiscal deficit from the present level to 4 per cent and revenue deficit to 1.5 per cent," he said.

On India's recent decision to import 200 tonnes of gold, Mukherjee said that in value terms this is very insignificant. While India's foreign exchange reserves currently stand at $285 billion, the import value of 200 tonnes of gold will be around $6 billion only, he said.

Thursday, November 5, 2009

Marks & Spencers, the British retail group, today said a strong 21 per cent growth in operating profits in its international operations were offset by tough market conditions and start-up losses in its India and China business.

The retail group today reported an international operating profit before property disposals at £65.9 million. In its first-half financial results for 2009-10, reported today, the group said it was, however, on track to open 10 stores with Reliance Retail over the next two years, spread over 200,000 sq ft. Two retail outlets were opened during the first half of this financial year, it said. On March 31, Marks and Spencer Reliance India Pvt Limited, a 51 per cent subsidiary of the group, completed the acquisition of 100 per cent of the issued share capital of Supreme Tradelinks Pvt Ltd, which up until that date was the group’s franchisee in India, for cash consideration of £6.1 million and transaction costs of £0.8m, it said. The acquisition contributed £2.9 million to sales and a £1 million loss to operating profit in the period since acquisition.

Monday, November 2, 2009

For just about Rs 120 a month, you can now access the online version of Microsoft’s Office ’07. Thanks to ‘cloud computing’ company Nivio, it is now possible to rent MS Office for a fraction of its shelf cost and use it at the click of an icon without having the memory-guzzling software residing in your computer. And, it’s completely legal.

Nivio, a four-year-old Swiss technology company promoted by Sachin Duggal, 26, and his partner, Saurabh Dhoot, 25 (of the Videocon family), provides storage and rent-a-software service to over 2.5 million online customers around the world.

Duggal belives the potential for the rent-a-software business in India is enormous, given the rampant piracy in the country due to high cost of professional software and easy access to illegal copies. A typical Microsoft Office Suite, depending on its components and buyer profile could cost around Rs 14,000 for a single user licence, making it a prime target for pirates.

Duggal says most users in India do not relate the price of the software with its usage, leading to wide-scale piracy. Nivio finds a killing business proposition in this anomaly, in providing legal software at a price making piracy unprofitable. Duggal believes that with software companies’ never-ending war against piracy, his business model will bring incremental customers and revenues that have so far been left untapped.

Nivio also plans to take its rent-a-sofware business from its current online version to a complete offline format. It plans to provide a complete hardware suite for an upfront and one-time fee of Rs 3,000 and a monthly subscription of Rs 1,100, for which customers will get a set-top box (replacing a computer's CPU), an LCD screen, mouse and keyboard. This new offering will also come with a broadband connection. Duggal says a typical broadband connection in India anyway costs Rs 700 a month, thus bringing down the effective cost of his new product to just Rs 400 a month. The new hardware suiteNivio plans to offer is also expected to be super-energy efficient. “On a eight hours a day usage basis, a typical computer consumes energy worth Rs 220 a month. Our product will have a monthly energy bill of Rs 35 only,"Duggal contends. This Rs 185 a month saving on energy bill further brings down the monthly cost to Rs 215.

The company has so far raised $8 million in equity and plans to raise another $11.5 million in two tranches — $3.5 million soon and another $8 million in about 16 months. Duggal says the enterprise value (EV) of his company, based on the last stake sale, is $100 million and he hopes to make it a $1 billion EV in the next six years. The company is presently owned by 17 shareholders, of which the only institutional investor is Deutsche Bank Pension Scheme.

Seven months after the launch of Nano, Tata Motors is toying with the idea of letting local garage assemblers put together the world’s cheapest car and also sell it under a brand of their own.

The company, which is revisiting the concept of distributed manufacturing mooted by Chairman Ratan Tata when he first talked of the Rs 1 lakh car several years ago, will become the world’s first to attempt such a "federal" structure of manufacturing.

Speaking at The Economist Innovation conference in London on Friday, Tata Motors Vice-Chairman and former managing director Ravi Kant said with the new Nano plant likely to start commercial production in the last quarter of this financial year ending March 2010, the company may allow enterprising assemblers to set up micro-assembly sites across the country, with each producing some 10,000 cars a year.

Ravi Kant"We call it Nano, they (assemblers) don't have to," said Kant, who received the The Economist Innovation award 2009 (for business process) on behalf of Tata for developing and rolling out the world's cheapest car.

Experts, however, said handing over the branding power to small assemblers may not be easy. For one, the perceived and actual safety of a car has always been associated with the brand.

Tata Motors will have to be extra careful about safety concerns after a small number of Nanos sold in India reported technical problems last month, forcing the company to conduct a preemptive audit of the quality of cars already shipped as well as those in the inventory.

“The Indian car market has still not come to this stage. Given that a car like Nano is three or four year’s investment, customers will still go for established brands from strong OEMs (original equipment manufacturers; in this case Tata Motors). So this idea may not fly very well,” said Abdul Majeed, leader, automotive practice, with PricewaterhouseCoopers in India. There would also be concerns about after-sales services and spare parts, he added.

Ratan Tata spoke of distributed manufacturing when he first went public with his desire to make a Rs 1 lakh car, as Nano was referred to for years until it was christened. Though this idea was never officially abandoned, the company spent the next few years absorbed in developing the car and setting up the new plant, which had to be shifted in a hurry from Singur in West Bengal to Sanand in Gujarat owing to problems over land acquisition.

The Sanand plant is expected to go into commercial production in the January-March quarter of 2010 with an initial capacity of 250,000 a year, scalable to 350,000.

Nano is expected to be launched in Europe in 2011. Although its price here is yet to be decided, Kant said it may well be the cheapest to hit these markets. On the potential competition to Nano, Kant said it might take a combination of a global car maker and an Indian one to mount a credible challenge. “I am not saying it cannot be done alone, but we clearly have the first-mover advantage,” he said.

NANO FCTS* 80 per cent of Nanos sold in India so far are the middle-and top-end versions (priced way above Rs 1 lakh)* 45-50 per cent Nanos are chauffeur-driven in India* Tata Motors holds 37 patents connected with Nano* Assemblers from over 50 countries have shown interest in it* During its six-and-a-half years in development, the material costs of Nano went up three times, but the car came out on the promised price